With Defined Contribution plans now favoured over Defined Benefit pension schemes, there is a marked shift towards outcome-oriented investing. Investors are increasingly seeking to access better engineered, innovative multi-asset products to provide reliable investment returns over their lifetime that will ultimately provide an appropriate income in retirement.
The industry’s response to this demand has been the development of fund solutions. In recent history, this may have been achieved through diversification, facilitated through investments in multi-manager funds. However, this type of product has found only limited success; a one size fits all design, high fees and a lack of transparency has resulted in a lack of investor demand that, in turn, has led to the widespread closure of many multi-manager funds over the last eight years.
Increasingly, European institutions are marketingfund solution products that are tried and tested in more mature DC markets such as the US, South Africa and Australia. These products attempt to consider the investor’s personal circumstances and include lifestyle and target date funds. These funds are fund-of-fund solutions which blend underlying asset class funds using glide paths and asset allocation structures and are designed to take people up to and through their retirement.
What is limiting the creation of these types of multi-asset fund solution products?